Types of Loans & Credit

With so many different types of loans and credit offered by lenders, it can be difficult to determine what solution is right for you. A good place to start is to make sure understand what your options are. Here are some examples of different types of loans and credit.

Secured Loans: A secured loan is one that is made safe, or backed, by collateral such as a house or car.

Unsecured Loans: An unsecured loan or debt is a personal loan in which no collateral is pledged. The only evidence of an unsecured loan is a signed note (the document you are asked to sign at loan closing).

Credit Cards: Credit cards are the most common type of personal credit. They allow repeated transactions up to a maximum credit limit, also known as your available credit line limit. Each time you charge something, you are borrowing the money until you pay it back. If you decide to pay back the money over time, the credit card company adds finance charges to your account. Each month, you will pay a calculated amount until the borrowed amount is repaid.

Second Mortgage/Home Equity Loan: This type of loan puts your home to work for you. By assessing the value of your home, minus what you owe on your mortgage, the remainder may be available to you in the form of a loan.

First Mortgage Loan: When you purchase a home through the help of a lender, you’re securing a first mortgage loan.

Refinance Loans/Debt Consolidation: These loans pay off your creditors, leaving you with just one payment to manage. Your interest rate may be reduced in some instances, which could lead to a lower monthly payment.

Retail and Sales Finance Loans: When you purchase a product on a retail sales program (such as no payments for 12 months, same as cash, etc), that purchase is made possible by a financial institution. If, at the end of that term you are not able to make the agreed-upon payments, the financial institution may convert the balance into a personal loan or revolving balance.